OFTO Tender Round 4 and future tenders. Friday 18 th March 2016

Transcription

1 OFTO Tender Round 4 and future tenders Friday 18 th March 2016

2 Agenda for the day Arrival, registration and networking 09:30 10:00 Welcome and introduction to Ofgem s Networks Division Stephen Beel, Partner, Competitive Networks, Ofgem OFTO tenders, overview of Tender Round 4 process and timings Pete Wightman, Senior Manager, Tenders and Licence Development, Ofgem Burbo Bank Extension project overview and key highlights Claus Bøjle Møller, Programme Director, Burbo Bank Extension, DONG Energy Tender Round 5 and beyond Pete Wightman, Senior Manager, Tenders and Licence Development, Ofgem Other updates from Competitive Networks Stephen Beel, Partner, Competitive Networks, Ofgem 10:00 10:20 10:20 10:45 10:45 11:20 11:20 11:40 11:40 12:00 Close 12:00 2

3 Welcome and introduction to Ofgem s Networks Division Steve Beel, Partner Competitive Networks, Ofgem

4 Ofgem structure GEMA Improving Regulation Consumers and Competition Energy Systems Networks Ofgem E-Serve Enforcement and compliance Analytical excellence Impact assessment and quality assurance Sustainability Horizon scanning Better regulation and UKRN support KPIs Retail markets Settlements and switching Principles-based regulation Consumer policy, standards and vulnerability Metering and smart meter rollout Smarter markets One-day switching Wholesale markets Security of supply Energy trading, market integrity and transparency Transmission policy and pricing Connections, entry and exit Smart grids and distribution policy Flexibility and storage System operation System integration Europe RIIO and price control reviews Regulatory finance Reporting and monitoring costs and outputs Onshore competition Offshore tenders Interconnector investment Responsible for the efficient administration of DECC s environmental schemes and consumer and social programmes. 4

5 Ofgem and the Networks Division Networks Division overview Focused around delivering best value to consumers through a combination of competition and forward looking regulation. Offshore Competition (OFTOs) Networks Division Competitive Networks RIIO Networks Onshore Competition (CATOs) Interconnectors 5

6 Any Questions? 6

7 OFTO tenders, overview of Tender Round 4 process and timings Pete Wightman, Senior Manager, Tenders and Licence Development, Ofgem

8 OFTO regime objectives Objectives for the Offshore transmission regime To attract new funding to invest in offshore wind energy. Ensure electricity links delivering power to shore are fit for purpose and provide value for money. Provide a new regime for competitive tendering to: o Lower the cost of building and operating assets. o Enable new players to bring innovative technical, operational and financial solutions to the connection of offshore wind farms. o Provide a lighter touch regulatory approach (since there will be no need for regular price control reviews for OFTOs). 8

9 OFTO regime key figures 3 OFTOs: the story so far number of tender rounds we have initiated (TR1 2009, TR2 2010, TR3 2014) GW total number of projects in the first 3 tender rounds operational OFTOs in place Approximate number of gigawatts of electricity which will be connected through OFTOs by all the projects in TR1, TR2 and TR3 Over 99% 2.9bn 200m to 400m OFTO availability performance since the first licence grant investment to date savings to consumers from first tender round, as estimated by independent evaluation 9

10 OFTO tender process Tender process How will it work? The tender process has been developed to be robust, fair and transparent to Developers and Bidders. The process has been demonstrated and established through previous Tender Rounds. EPQ tests high level approaches and relevance of past experience Enhanced Pre-Qualification (EPQ) Shortlist of qualifying bidders Invitation to tender (ITT) ITT is more detailed stage with specific proposals on a project specific basis, with benefit of detailed draft transfer agreement and full M&A style data room There are up to four stages overall in the process through to licence grant: 1. Enhanced Pre-Qualification (EPQ) 2. Invitation to Tender Optional: stage only run if required BAFO Preferred bidder 3. Best and Final Offer (optional) 4. Preferred Bidder to Licence grant (transaction phase) Licence Grant 10

11 Tender Round 4 TR4 One project: Burbo Bank Extension project o Capacity: 258MW o Initial Transfer Value: 230.2M Burbo Bank Extension Bridge between TR3 and TR5 Changes since TR3 Required changes: o Public Contracts Regulations 2015 and impact on structure of PQQ that some bidders may be familiar with Reduction of burden to bidders: o o Removal of EPQ and ITT bidder payments Removal of ITRS requirement RPI vs. CPI review Decision expected in coming weeks 11

12 Tender Round 4 TR4 Tender process timings Timings will be broadly similar to TR3 tender process: EPQ document available April 2016 Return of Confidentiality Agreement and Conflict of Interest form April 2016 Deadline to raise clarification questions May 2016 Submission receipt deadline June 2016 Shortlist for ITT announced September 2016 ITT stage commencement September 2016 Anticipated preferred bidder announcement March 2017 What the tender documents are and how to get these Tender documentation will include: o EPQ Document (including questionnaire and evaluation criteria) o Preliminary Information Memorandum and Vendor Due Diligence report (in lieu of IM) o Draft Licence o Draft Transfer Agreement How to register your interest and access the tender documents o Go to Ofgem s online e-tendering portal at: o Set-up an account, register your interest in TR4 and access the documents 12

13 Any Questions? 13

14 Burbo Bank Extension Claus Bøjle Møller, Programme Director Burbo Bank Extension, DONG Energy

15 BURBO BANK EXTENSION Tender Round 4 Launch Event 18 th March 2016

16 Agenda and Burbo Bank Extension organisation Agenda Agenda and Burbo Bank Extension team introduction Introduction to Vendor Introduction to DONG Energy Introduction to the Burbo Bank Extension Offshore Wind Farm project Investment opportunity Transaction timeline Burbo Bank Extension OFTO Divestment Team Name: Claus Bøjle Møller Role: Programme Director Burbo Bank Extension Background: M.Sc. in Energy Engineering from Technical University of Denmark (DTU, 2002), Graduate Certificate in Business Administration (HD Part 1) from Copenhagen Business School (2005) Has been working for DONG Energy Wind Power since 2006 in various projects within development and construction including Engineering, Procurement and Construction (EPC) Director of 400 MW Anholt Offshore Wind Farm ( ) and Project manager (Development and EPC) of 30 MW onshore wind farm in Sweden ( ). Previously worked for the Danish Wind Industry Association and engineering consultancy Ramboll Responsible for execution, asset and financial management of Burbo Bank Extension, previously EPC Director for the project (Dec Sept. 2015) Name: Olivia Breese Role: Head of Structured Solutions and OFTO Name: Andrew Moreland Role: Senior OFTO Transaction Manager 16

17 Burbo Extension Ltd developer and vendor Ownership overview The Developer and participating company in the BBW02 Offshore Wind Farm is Burbo Extension Ltd The Developer is an indirectly owned subsidiary of DONG Energy A/S, KIRKBI A/S and PKA A/S DONG Energy developed the project between 2010 and its financial investment decision (FID) in late 2014 DONG Energy divested 50% of the project to Kirkbi and PKA in February 2016 The wind farm including all transmission assets will be constructed by DONG Energy KIRKBI Burbo Extension Holding Ltd PKA Burbo Extension Holding Ltd 25% 25% 50% Burbo Extension Holding Ltd DONG Energy Burbo Extension Ltd Project and EPC organisation Burbo Extension Ltd Well established and highly experienced project and EPC team constructing the Project, benefiting from DONG Energy s market leading construction experience Safety and environmental impact are key focusses for delivery of the assets Project organisation built on experience from previous OFTO transactions 17

18 DONG Energy is the market leader in offshore wind and has successfully constructed and divested 7 OFTO assets Overview of DONG Energy constructed and under construction wind farms Lincs 1 project not included in chart as DONG Energy did not lead the construction of the project. TR2a Project: 270MW TR4 Project: 258MW TR3 Project: 210MW Hornsea One Walney Extension MW 6,500 6,000 TR2b Project: 389MW 5,500 TR2a Project: 630MW TR1 Project: 183MW Race Bank Burbo Bank Extension 5,000 4,500 4,000 TR1 Project: 90MW TR1 Project: 184MW TR1 Project: 173MW Westermost Rough West of Duddon Sands Gunfleet Sands III Demo London Array, Anholt Gode Wind I + II Borkum Riffgrund1 3,500 3,000 2,500 2,000 Frederikshavn Flats Kentish Barrow Horns Nysted Tunø Rev 1 Vindeby Knob Middelgrunden Burbo Bank Walney I Gunfleet Avedøre Sands Horns Rev Operating - year Walney II 1,500 1, Project by project planning and execution of offshore projects Industrialised approach to planning, supply and execution of offshore projects 18

19 Overview of Burbo Bank Extension Geographical location and layout Burbo Bank Extension Gwynt y Môr ~8 km Burbo Bank Liverpool North Hoyle Rhyl Flats Service harbour (expected) Transmission cable (under construction) Burbo Bank Extension (under construction) Onshore substation Offshore substation Bodelw yddan Key highlights Well-known location and operating environment with attractive site Item Overview conditions Located in close proximity to shore Fully permitted by regulatory authorities Expected to be the first operational UK project under the CfD framework Construction commenced in Q and is well progressed First power is expected October 2016 Turbines 32 MHI Vestas V MW Capacity 258 MW Offshore / onshore cable route c km / c km Offshore substation 1 platform Distance to shore c. 7 km Expected availability 1 98% 19

20 Overview of the wind farm and transmission asset infrastructure Overview of generation and transmission assets Generation assets Turbines, foundations and inter-array cables Transmission (OFTO) assets Offshore substation, export cable, onshore substation and connection to grid Offshore substation Onshore substation 34kV inter-array cables 220kV export cable 8 MW turbines installed on monopile foundations The internal grid collects the output from the turbines From the base of each tower, there are 34kV interarray cables which connect the turbines to the offshore substation through 8 strings located within the centre of the wind farm The offshore substation collects all power from the turbines and transforms it to higher voltage The power is transported from the offshore substation to the onshore substation through a 220kV export cable The onshore substation is connected to the National Grid Bodelwyddan substation Transmission assets to be transferred to the OFTO comprise the offshore substation, the 220kV export cable, the onshore cable, substation and 400 kv connection to National Grid 20

21 Investment opportunity Project highlights Expected to be the first operational UK project under the CfD framework Highlights 258MW generation capacity with transmission assets initial transfer value equal to 230 GBPm All consents in place and transmission asset construction well advanced Project The assets are being constructed to the optimal economic specification The characteristics of the site enable the project to make use of known technology Short distance from shore, low water depth and well known operating environment Onshore substation in close proximity to NGET substation for grid connection point Supply chain Experienced supply and installation contractors, strategically appointed through competitive tenders Tendered utilising DONG Energy s product lines to contribute in the holistic goal to reduce the cost of electricity Experienced Developer and EPC Manager Highly experienced project developer bringing significant expertise to the project DONG Energy active in the offshore wind sector for more than 20 years DONG Energy has leveraged its experience with regard to its project, transaction and operational competences to deliver the project to the highest industry standard Experienced OFTO Partner DONG Energy has participated in all of Ofgem s OFTO tender rounds to date Burbo Bank Extension will be DONG Energy s ninth transmission asset divestment with three further transactions pre

22 Transaction overview High level timeline Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 OFTO tender phases EPQ ITT PB Key milestones Ofgem tender launched Project first power License Grant High level timeline EPQ Launch Enhanced Pre-qualification - 1 st April 2016 Preliminary Information Memorandum, technical vendor due diligence report and transfer agreement will be made available at EPQ commencement Asset Transfer Transfer to OFTO once all assets are fully commissioned Transfer of transmission asset related contracts where appropriate including appropriate benefit of warranties Transfer Agreement The transfer agreement will be based on Ofgem guidelines Burbo Extension Ltd as vendor Bespoke warranty package for the Burbo Bank Extension project Division of responsibilities pre and post asset transfer Market standard credit support will be offered by the Developer including relevant liability and indemnity cover Interface Agreement The Interface Agreement will be bespoke for Burbo Bank Extension Based on the relevant industry standard form precedent, developed to reflect operational project experience to date 22

23 Construction update Burbo Bank Extension installation and construction Onshore Substation Civil works substantially complete All HV components delivered HV cable termination work started On track to energise grid connection as planned summer 2016 Onshore Cable Route Substantially complete all cables installed and jointed The complex HDDs (landfall and river) completed as planned in 2015 Marine Cable Offshore export cable fabrication progressing as planned to be ready for load out 1 June 2016 before pull-in at transition joint bay 23

24 Construction update Burbo Bank Extension installation and construction Offshore Substation Primary structures are complete Jacket is upended Topside is being outfitted Fabrication progressing as planned to be ready for loadout 1 June 2016 All HV / MV equipment and control systems delivered Installation of HV / MV equipment and control systems ongoing through commissioning phase 24

25 DISCLAIMER This presentation is being issued by Burbo Extension Ltd (the "Seller") to a limited number of parties in connection with the proposed sale by the Seller of the offshore transmission system assets relating to the Burbo Bank Extension offshore wind farm project (the "Proposed Transaction"). This presentation is for the persons to whom it is addressed. This presentation does not constitute an offer or invitation for the sale or purchase of securities or any of the businesses or assets described in it. The information in this presentation, which does not purport to be comprehensive, has not been independently verified. No undertaking, representation, warranty or other assurance, express or implied, is or will be made by the Seller and, so far as is permitted by law, no responsibility or liability is or will be accepted by the Seller or any of its affiliates, or by any of their respective directors, officers, employees, agents or advisers in relation to the accuracy or completeness of this presentation or any other written or oral information made available to any interested party or its advisers and any such liability is expressly disclaimed. No information set out or referred to in this presentation shall form the basis of any contract. The information contained in these slides, the presentation made to you verbally and any other information provided to you (in writing or otherwise) in connection with the Proposed Transaction is for information purposes only and no reliance should be placed on it. Any prospective purchaser shall be required to acknowledge in the sale and purchase agreement for the Proposed Transaction (when, as and if executed) that it has not relied on or been induced to enter into such an agreement by any representation or warranty, save as expressly set out in such agreement. This presentation has been delivered to interested parties for information only and on the express understanding that they shall use it only for the purpose set out above. The Seller gives no undertaking to provide the recipient with access to any additional information or to update this presentation or any additional information, or to correct any inaccuracies in it which may become apparent. This presentation is being distributed on the basis that each person in the United Kingdom to whom it is issued is reasonably believed to be such a person as is described in Article 19 (Investment professionals) or Article 49 (High net worth companies, unincorporated associations etc.) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 as amended and is a qualified investor within the meaning of section 86(7) of the Financial Services and Markets Act 2000, or is a person to whom this presentation may otherwise lawfully be distributed. Persons in the United Kingdom who do not fall within such descriptions may not act upon the information contained in it. The distribution of this presentation may in certain jurisdictions be restricted by law or other regulations. Accordingly, recipients of this presentation should inform themselves about and observe all applicable legal and regulatory requirements and hereby represent to the Seller that they are entitled to receive this presentation without contravention of any legal or regulatory requirements in the jurisdiction in which they reside or conduct business. This presentation does not constitute an offer to sell or an invitation to purchase securities or any business or assets in relation to the Proposed Transaction in any jurisdiction. This Presentation does not purport to contain all the information that a prospective investor may require. Prospective investors should conduct their own independent investigation and analysis of any information contained in this Presentation and are advised to seek their own professional advice on the legal, financial and taxation consequences of making an investment. This presentation shall not exclude any liability for, or remedy in respect of, fraudulent misrepresentation. By accepting this presentation, the recipient agrees to be bound by the foregoing limitations.

26 Tender Round 5 and beyond Pete Wightman, Senior Manager, Tenders and Licence Development, Ofgem

27 Tender Round 5 Tender Round 5 Expected to launch later in 2016 Race Bank Walney Extension Dudgeon Galloper Rampion 27

28 Dudgeon Offshore Wind Farm Statoil 35%, Masdar 35%, Statkraft 30% Wind farm site area - 55 km MW - 67 x 6MW Siemens WTGs on monopile foundations One 132/33 kv offshore substation on jacket foundation Two submarine cables - ca 40 km Two onshore cables ca 48 km One 400/132 kv onshore substation at Necton FID 1 July 2014 First electricity January 2017 Project completed December 2017 OFTO transaction completed H Further information at : Stemat Spirit loading of offshore export cables.

29 Public Information Race Bank Offshore Wind Farm Project Overview Offshore Wind Farm Overview 400kV export cable North and South Offshore substation Onshore substation NGET Walpole 400 kv substation 34kV Inter-array cables 220kV export cables Key Facts Transmission Asset Overview Ownership DONG Energy RB (UK) Ltd The project company is 100% indirectly owned by DONG Energy Wind Power A/S Offshore Wind Farm 565 MW capacity (TEC) 91 x SWT MW WTG Location Key dates The Greater Wash / North Sea Approximately 21km from shore FID: June 2015 Onshore construction start: February 2015 Offshore construction start: Q First power Q Transmission assets One onshore substation, adjacent to NGET Walpole substation, 11.6 km from shore Two 330MW offshore substations Two 220kV offshore export cables (71km) One 220kV interlink between offshore substations Two 400 kv onshore export cables to NGET Walpole substation Independent SCADA system

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31 Public Information Walney Extension Offshore Wind Farm Project Overview Offshore Wind Farm Overview 400kV export cable East and West Offshore substation Onshore substation NGET Middleton 400 kv substation 34kV Inter-array cables 220kV export cables Key Facts Transmission Asset Overview Ownership DONG Energy Walney Extension (UK) Ltd The project company is 100% indirectly owned by DONG Energy Wind Power A/S Offshore Wind Farm 660 MW capacity (TEC) 2 phases: WOW03 (Vestas MW WTG), WOW04 (Siemens SWT MW WTG) Location Key dates The Irish Sea, north west of existing DONG Energy wind farms Approximately 19 km from shore FID: October 2015 Onshore construction start: July 2015 Offshore construction start: Q First power WOW03: Q First power WOW04: Q Transmission assets One onshore substation, adjacent to NGET Middleton substation, 1.2 km from shore Two 330 MW offshore substations Two 220kV offshore export cables One 220kV interlink between offshore substations Two 400 kv onshore export cables to NGET Middleton substation Independent SCADA system

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33 Tender Round 5 Ongoing review of the tender process leading up to TR5 and beyond PQ/QTT vs EPQ RPI vs. CPI Continuously reviewing where the process can be streamlined (e.g. process timings; running combined tender stages for different projects) Reducing the burden on bidders whilst maintaining transparent competition and robust evaluation 33

34 Upcoming OFTO opportunities TR6 and beyond Other project with CfDs: o Beatrice (664MW) o East Anglia 1 (714MW) o Hornsea One (1200MW) o Neart na Gaoithe (450MW) Longer term pipeline of projects, expected to compete in next CfD auction Strong government support for renewables, recent budget indicated: o CfD auction in this Parliament for up to 4 GW of offshore wind and other less established renewables, up to 730M (with next auction worth 290M) o Strong emphasis on continuing cost reduction 34

35 Any Questions? 35

36 Other updates from Competitive Networks Steve Beel, Partner Competitive Networks, Ofgem

37 Update on onshore competition Overall process Policy: we are developing proposals to run tenders for new, separable and highvalue onshore transmission projects. We aim to be in a position to run a tender from Legislation: the Department of Energy and Climate Change has recently published draft legislation to support the onshore competitive regime, and the Energy and Climate Change Committee are carrying out pre-legislative scrutiny. Projects: we ll assess whether to tender particular projects when the transmission owner that s currently responsible submits its Needs Case for the project to us for approval. Next steps: o Pre-tender arrangements and conflict mitigation o Tender models and market offering 37

38 Update on Interconnectors First cap and floor window held in 2014 o o 5 projects granted a cap and floor regime in principle Developed by National Grid, Transmission Investment and Element Power o Total of 5.3GW, < 5bn o Due to deliver by 2020 Second cap and floor window opening on 31 st March o Substantial amount of interest from 3 rd party developers Scope for regime variations to support a broader range of finance (eg project finance) o Letter of support from EIB 38

39 Any Questions? 39

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